I’m in Tokyo, where the escalating U.S.-China trade spat is starting to take its toll. The IMF, which is meeting in Bali this week, said this morning it is cutting its global growth forecast to 3.7% for this year and next, down from 3.9%, because of the trade war. And in meetings with NTT CEO Jun Sawada and Hitachi Chairman Hiroaki Nakanishi, it was clear the challenge of navigating between two feuding superpowers is top of mind.
The last few weeks have clarified the Trump administration’s trade strategy: to cut quick deals with allied countries like Canada, Mexico and South Korea, while isolating China. (That, of course, was also the Obama administration’s aim with the TPP treaty, which Trump trashed.) The Chinese have gotten the hint, which is why they have ramped up their rhetoric. “We demand the U.S. stop such misguided actions,” Wang Yi, China’s foreign minister said yesterday, during a visit by Secretary of State Mike Pompeo. All signs are that this fight will continue to escalate.
Caught in the middle are countries like Japan and Canada. I’ll be cohosting a dinner at the Canadian embassy tonight with Canada’s Finance Minister Bill Moreau and a group of top Japanese executives, as part of the run up to next week’s Fortune Global Forum in Toronto. I expect to get an earful.
In the U.S., Dollar Tree stores are feeling the pain. More below.
When Facebook was red-faced over the Cambridge Analytica scandal, it turns out Google was hiding its own secret. The company’s moribund Google+ social network had an error in its coding that allowed third-party app developers to collect not only the data of users who signed into their services using their Google+ credentials, but the data of those users’ friends, too. When it discovered the flaw, it kept quiet because it feared regulatory scrutiny. Google is now shuttering Google+, not that many people will notice. Wall Street Journal
Richard Branson promises his Virgin Galactic outfit “should be in space within weeks, not months.” But wait, there’s more: “And then we will be in space with myself in months and not years… We have got a very, very exciting couple of months ahead.” Your moves, Elon and Jeff. CNBC
Sony has confirmed that there will be a successor to the blockbuster PlayStation 4 gaming console, despite industry fears that the days of the standalone console are fading. “It’s necessary to have a next-generation hardware,” Sony president Kenichiro Yoshida told the Financial Times. Analysts believe more powerful hardware is needed to host esports events, where Sony is lagging. FT
Nelson Peltz’s Trian Fund Management is reportedly considering a takeover of Papa John’s, which is up for sale. The activist hedge fund also owns a 13% stake in Wendy’s. Apparently more bidders are interested in Papa John’s, in which founder John Schnatter still holds a nearly 30% stake. Fox Business
Around the Water Cooler
Google has until tomorrow to file an appeal against its $5 billion Android antitrust fine in the EU, and it is reportedly set to do so. The fine relates to Google’s use of its control of Android to favor its own search and other services. Google is already appealing a separate antitrust fine of $2.7 billion, which relates to its manipulation of search results to favor its own comparison shopping service. Financial Times
HNA Group has reportedly put up for sale $11 billion worth of property assets, mostly within China. The conglomerate is looking to offload more than 80 hotels and commercial and residential buildings. This is apparently HNA “strategically exiting some areas,” rather than a fire sale. The group is under pressure from Beijing to shrink its balance sheet. Reuters
The German Economic Institute in Cologne said today that a “hard” Brexit would hit German exports to the U.K., um, hard. If there is no EU-U.K. trade deal, tariffs would kick in and the U.K. and Germany would be hit particularly forcefully, with the automotive sector bearing the brunt. Fun quote: “In the worst case scenario, [EU-U.K.] trade may be reduced by around 50%.” IW
The South China Morning Post has a big piece on Chinese tech guru Kai-Fu Lee, who reckons automation will destroy 40-50% of jobs around the world, and has some interesting thoughts on how the Chinese and American tech sectors “work in parallel universes.” SCMP